During recent years, a number of employees were faced with the dilemma of their companies restricting their stock options. While each individual corporation has their own reasons why they would stop providing such options, Jeremy Goldstein highlights the three major common concerns revolve around:
- It is likely that the corporation’s overall stock value will experience a significant drop and therefore make it impossible for employees to benefit from the option of buying the company’s stock.
- Many employees feel as if this option provides more options for unnecessary risks rather than an actual, stable benefit. They are aware that unpredictable economic downturns will reduce the value of the stock options to worthless and therefore feel as if they’re gambling their cash away.
- The stock options create more complicated accounting burdens and result in relevant costs being more expensive than the advantages.
However, despite those concerns, stock options for employees pose a number of advantages that are potentially more preferable than additional wages, equities, or improved health insurance. The stock options achieve their full earning potential when employees prioritize the company’s success in the workplace. When their personal investments are on the line, it encourages them to work harder, attract more desirable clients, or develop innovative solutions to existing problems.
The best stock option solution Goldstein promotes for a company to implement is known as the “knockout.” These consist of the same time limits and vesting requirements as regular stock options, but the employees will automatically be released from the company’s stock if the cost per share falls under a certain amount over an extended period of time.
Jeremy L. Goldstein is the chair of the Mergers and Acquisition Subcommittee of the Executive Compensation Committee of the American Bar Association Business Section and is a frequent writer and speaker on corporate governance and executive compensation. He has been involved in some of the decade’s largest corporate transactions including the acquisition of Goodrich of United Technologies.
Mr. Goldstein is also a partner at Jeremy L. Goldstein and Associates LLC, a law firm dedicated to advising compensation committees, CEOs, and management teams on corporate governance matters. He is a regular contributor of numerous magazines and journals including the Chambers USA Guide to America’s Leading Lawyers and The Legal 500. Jeremy Goldstein holds a J.D from New York University School of Law, an M.S from the University of Chicago and a B.A from Cornell University. Learn more: http://jlgassociates.com/